Essays In Finance

Abstract

In my dissertation, I exhibit three studies in Finance. In Chapter 1, I provide a new perspective on the optimal call policy for corporate callable bonds by evaluating the proportion called in call exercises. My data suggests that firms on average call only 66% of the amount initially offered when they call their bonds with fixed-price call provisions, and 69% when they call their bonds with make-whole call provisions. I examine how the proportion called in a call exercise is correlated with bond and firm characteristics. In Chapter 2, I analyze the impact of the maturity of a firm’s bonds upon the liquidity of the firm’s remaining bonds. The results suggest that a reduction in the number of bonds outstanding leads a reduction in liquidity. In Chapter 3, I characterize the presence and consequences of sustainability compensation targets using novel hand-collected data of managerial annual incentive plans (AIP) goals in 1994-2020. The data indicates that sustainability targets are often quantified with corresponding overall weight in the incentive plan instead of rarely observed sustainability modifiers. Moreover, sustainability compensation goals are valuable if implemented in firms with high past pollution levels, exclusively, consistent with optimal contracting.